LOCKDOWN LEVEL 1 [DAY 27]
TOTAL DAYS 208 – 07 HOURS 50 MINUTES
By the close of trade on Monday, the South African rand strengthened against the US dollar.
- Hopes that the US stimulus deal will be reached before the Presidential elections lifted sentiment. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin edged closer on some policy differences holding up a sweeping coronavirus relief package, but disputes remained Monday as the two worked to see if a deal could be struck before the election. The US dollar traded lower against most of the major currencies on Monday as the new stimulus deadline looms. Over the weekend House Speaker Nancy Pelosi gave the White House a 48 hour deadline. She said if they want to get something done before the election, it needs to happen by Tuesday. President Trump is pushing for a deal and the White House is cautiously optimistic but the sell-off in stocks is a sign that investors don’t believe that there’s enough political support in Congress to support a new package.
- In the US, the Federal Reserve (Fed) Vice Chair, Richard Clarida, stated that the US economy is rebounding strongly after taking a big hit because of the coronavirus pandemic, but it might be another year before the economy returns to pre-crisis levels and that it could take even longer for the labour market to recoup lost ground. Slowing U.S. employment gains and an increased proportion of permanent layoffs could undermine the economic recovery with disproportionate harm to minorities, said Federal Reserve Bank of Atlanta President Raphael Bostic. “Widespread permanent job loss could become a material risk to the recovery,” Bostic said Monday in prepared remarks to the Securities Industry and Financial Markets Association. “The data on this are clear: permanently laid off workers find it far more difficult to rejoin the labor force. This would make recovery more difficult to sustain.”
- The New York Stock Exchange told New Jersey lawmakers that it’s prepared to move operations out of state should they impose a new tax on electronic trades via data servers. In late September, the world’s largest exchange by market capitalization conducted a test “for a wholesale transition out of New Jersey,” Hope Jarkowski, co-head of government affairs for NYSE parent Intercontinental Exchange Inc., said during an Assembly financial institutions and insurance committee hearing conducted by video feed. “From Sept. 28 to Oct. 2, we moved our production servers for our NYSE Chicago exchange out of New Jersey.
- On the data front, the US Home Builders’ monthly confidence index surprisingly advanced in October.
- The yuan held near a two-year high against the dollar in offshore trade on Tuesday, on signs of China’s robust economic recovery while the Australian dollar slipped to a three-week low as the central bank looks set to enhance monetary easing. Broader risk sentiment was curbed by caution ahead of a Tuesday deadline to reach agreement on a U.S. coronavirus aid package as well as the Nov. 3 U.S. presidential election. China’s offshore yuan rose as high as 6.6695 per dollar on Monday, surpassing its 2019 peak and hitting its strongest level since July 2018.
- The yield on benchmark government bonds fell yesterday. The yield on 2026 bond dropped to 7.01%. Further, the yield on 2023 bond declined to 4.31%, while that for the longer-dated 2030 issue dipped to 9.25%.
In early trade on Tuesday, the US dollar is trading higher against the South African rand at R16.5544, while the euro is trading higher at R19.4820. The British pound has gained against the South African rand to trade at R21.4344.
By the close of trade on Monday, the euro advanced against most of the major currencies.
- The European Central Bank’s (ECB) President, Christine Lagarde, argued for accelerating disbursement of the EU recovery funds in 2021 and keeping mutualised fiscal measures in the EU toolbox.
- Britain refused to come back to the negotiating table with the EU, telling Brussels that unless there was a fundamental change in their approach there was little hope of agreement. Prime Minister Boris Johnson said on Friday there was no point in continuing talks and it was time to prepare for a no-deal departure when Britain’s informal EU membership – known as the transition period – ends on Dec. 31 2020. Michael Gove, his Brexit supremo who favours a deal, has struck a more conciliatory tone, saying agreement could be reached if the bloc compromised.
In early trade on Tuesday, the euro has marginally slipped against the US dollar to trade at $1.1768, while it has marginally weakened against the British pound to trade at GBP0.9092.